Use of Local Content in the Extractive Industries Enables Inclusive Growth

STORY HIGHLIGHTS

Local content generates jobs and economic diversification in developing countries

Conference in Vienna brings together Local Content Policy (LCP) leaders

Community of Practice will sustain knowledge exchange on local content

Extractive industries— mining, oil and gas— can create much needed jobs for people in host communities. Too often though, this does not happen and the transformational potential of these industries for development is lost.

“Much debate has taken place on whether the discovery and development of extractive industries is a blessing or a curse. Recent research suggests that it can be both,” noted Ellen Goldstein, Country Director for the World Bank in Austria. “Oil, gas and mining companies now rate employment among the most significant expectations in the communities in which they operate.”

" Sharing experiences on the design and implementation of local content policies can help fast track the learning curve for others that are doing similar work. "

Paulo de Sa

Manager, Oil, Gas and Mining Unit, Sustainable Energy Department, The World Bank Group

In an effort to translate the enormous potential of extractive industries into the concrete job creation and economic growth that so many expect, delegates gathered in Vienna on September 30 and October 1, 2013 to focus on Local Content Policies (LCPs) in the oil, gas and mining sectors. The two-day conference brought together over 170 senior representatives from government, industry and civil society to discuss how policy makers and industry can work together to support local economic development around the extractive industries.

The conference shared and discussed recent research on local content policies, and how to make them more effective for governments, industry, and communities. “Sharing experiences on the design and implementation of local content policies can help fast track the learning curve for others that are doing similar work,” said Paulo de Sa, Manager of the World Bank’s Oil, Gas and Mining Unit in the Sustainable Energy Department.

Participants discussed the use of public policies to leverage extractive industries to build local industrial capacity. More specifically, they focused on measures to encourage local business participation and improve knowledge transfer and innovation. These include development of resource corridors, clusters, special economic zones, enabling training and skills development, industry partnerships, as well as providing local content regulation and implementation tools.

“The meeting encouraged active engagement from Chile to Nigeria to Canada and beyond with business, government and civil society as equal partners, fostering dialogue to help move local content practices and policies forward,” said Marinke van Riet the International Director at Publish What You Pay, a coalition of civil society organizations working to improve governance in extractive industries.

While the conference highlighted the need for industry-wide collaboration, it also emphasized the important role of government guidance. Many participants cited the need for regulatory frameworks and incentives to promote local content development in some countries.

Simbi Wobote, Global Local Content Manager for Shell Exploration and Production International, said, “there is no question about the business case for sourcing locally. Having a local supplier that can deliver quality on time is good for the business.” He added, “We want transparent and clear local content regulations that are designed in a collaborative manner. This allows us to plan our investments.”

To address skills gaps that often hinder the growth of LCP, participants suggested that government incentives could encourage private public partnerships to help to direct and support the development of the needed skills among the local human resource pool.

The Mining Skills Strategy in Chile is an example of this type of approach. The initiative involves 12 large mining companies that account for 95 percent of copper production in Chile, 30 suppliers, training institutions, and the public sector represented by the Ministry of Labor and the Ministry of Mining. Joining forces helped identify the upcoming needs and evolution of the employment market, and also provided the scale to justify public sector investment in education focusing on youth and women, the most promising and underutilized portion of the population in Chile.

In response to the high level of interest in the conference, the World Bank announced its intention to launch a global initiative on local content policy that will facilitate further knowledge exchange on the issue. This effort will begin in 2014 with a working group to help define and guide next steps.

Paulo de Sa closed the conference by pledging that the World Bank will continue the dialogue and launch a global community of practice on local content. “The local content initiative will share best practices among stakeholders to promote effective local economic diversification generated by extractive industries,” he said.